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Board Gender Diversity: A Governance and Career Advantage

In a globally interconnected world, where stakeholders are more diverse than ever, board and management diversity are essential for organizations to thrive in the current business environment. However, while many organizations are advocating for enhanced board composition overall, there is still some work to be done to achieve a real gender balance, as less than one in five women currently hold board seats, according to Women in the Boardroom: A Global Perspective, a report compiled by the Deloitte Global Center for Corporate Governance.¹

Increasing the number of women on boards has been slow in the United States compared to some European countries. The organization, 2020 Women on Boards, whose goal is to have 20% women director representation by 2020, indicates that the percentage of women on Fortune 1000 U.S. boards rose to 17.7% in 2014, from 16.6% in 2013.²

Deborah DeHaas

In contrast, the average share of female directors serving on the boards of the largest listed companies in Europe reached 20.2% in October 2014, according to the European Commission’s women in economic decision-making database—an increase of 11.9% from 2010, when the issue was first put on the table.³ Today, there are only four countries in the European Union where women account for at least 25% of board members—France, Latvia, Finland and Sweden—and France and Sweden, among other EU countries, have proposed legislation to specify quotas.

Recognizing the importance of diversity, a number of boards have set their sights on expanding gender diversity. Board composition was named one of the top priorities in 2015 by 36% of the 250 companies surveyed for the 2014 Board Practices Report: Per­spectives from the Boardroom, a publication from the Society of Corporate Secretaries & Gov­ernance Professionals in collaboration with the Deloitte LLP Center for Corpo­rate Governance. The report noted that “amid pressure from shareholders, boards should consider placing greater consideration on recruitment efforts, particularly on recruiting diverse board members (e.g., diversity of thought, race and gender) while also consid­ering director tenure and how it influences overall board composition and independence.”

Corporate boards looking to add women to their ranks might need to open their aperture to see the benefits, forward-looking views and skillsets that gender diversity could bring to boardroom discussions. Numerous studies have found that companies with women on their boards outperform those with less gender diversity in terms of share price and performance, as well as certain financial metrics, including return on equity. Other studies have found that having more women on boards and their impact on decision-making can enhance shareholder value.

When assessing candidates, boards should consider looking at skills, and not necessarily titles, given that women hold less than 5% of the Fortune 500 CEO positions. Traditional thinking on board composition was that a director needed to have been a sitting CEO or another highly ranked C-suite executive. That view is changing, particularly as organizations have begun to limit the number of boards that their own CEOs can serve on. As a result, there are fewer corporate CEOs now available to sit on boards, which hopefully will encourage organizations to consider a wider pool of candidates. And as boards become more comfortable with considering a business unit CEO as a candidate, or a private company CEO or a CFO, that has widened opportunities for more women candidates.

What’s at risk with keeping to the tra­ditional methods of board recruitment and related outcomes? First, there could be a lack of board members with diverse experiences and views on emerging critical issues, such as cybersecurity, social media, international markets, analytics and recruiting new generations of talent. Second, the board could miss having a pulse on the trends and demographic changes that could have an impact on the organization’s corpo­rate strategy and business model. Third, there might not be the thinking, voice and perspective of those who are influ­encing the organization’s future direc­tion and shareholder value.

For those women who seek board positions, they should have a clear vision of what they seek from the companies they’re targeting for board-level opportunities. A company’s cultural fit should be a main consideration, which goes for anyone seeking a board position. In addition, women wanting to join a board should understand how their expertise, experiences or attributes would make them viable candidates.

It’s also important for women who aspire to be on boards to expand their personal networks and build a diverse set of relationships. At the same time, it’s important to create opportunities for others outside of their organizations, as relationships with those individuals may one day translate into opportunities in the boardroom.

Women should also make others aware of their interest in serving as a director, but in a strategic way and at the appropriate time. Just raising a hand and asking for a board position may not be the ideal way to get noticed. Rather, women executives may want to ask other senior board members and business leaders for advice on how to position themselves for a board and recognize that it may require first spending time either on private company or smaller boards so they are better positioned for a larger public company board.

Women who are looking at a potential director position should consider the cultural dynamics in the particular board room being considered. Does the company have a culture where a new director, and potentially a woman director, is going to be able to have a voice, be accepted and be successful? It’s important to understand how the board operates, how the committees work and how decisions are reached. It will also be important to meet other members of the board and management to assess the cultural fit as well.

Finally, it is critical to understand the current situation of the company and any unique or significant risks that either the company or the industry it resides in faces today. Prospective board candidates should thoroughly review all available public information, including financial filings and analysts’ reports, before taking on a board role and should feel confident that their experiences and skills would allow them to be a highly effective and contributing board member of that organization.

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About Deloitte Insights

Deloitte’s Insights for C-suite executives and board members provide information and resources to help address the challenges of managing risk for both value creation and protection, as well as increasing compliance requirements.